The graveyard of auction-rate securities claims against Merrill Lynch & Co. got a bit more crowded this week, with two decisions in the space of two days dismissing suits by ARS investors. A ruling by the U.S. Court of Appeals for the Second Circuit in one of the cases indicates that most Merrill ARS claims are going to stay buried.
The Second Circuit’s 23-page decision on Aug. 14 marks the court’s second foray into the Merrill Lynch auction-rate securities litigation, which is consolidated before Southern District Judge Loretta Preska (See Profile). Investors filed about a dozen individual and class suits against Merrill after the $330 billion ARS market froze in 2008, alleging that the bank had deceptively propped up the market by placing “support bids” to grease demand. Last November the circuit upheld Preska’s dismissal of the lead case in the multidistrict litigation, a proposed class action, citing the bank’s 2006 disclosure that it “may routinely place one or more bids in an auction…to prevent an auction failure.”
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